Mumbai, Feb. 17 -- The shares of HDFC Bank Ltd, the country's second largest private sector bank, hit a record closing high as the Reserve Bank of India (RBI) briefly allowed additional purchases by foreign investor late on Thursday.
They closed 6% off day's after the central bank barred additional purchases by foreign investors on Friday afternoon, as the limit was breached soon.
On Friday afternoon, the central bank said in a notice to RBI website, "HDFC Bank has crossed the overall limit of 74% of its paid up capital. Therefore, no further purchases of shares of this company would be allowed through stock exchanges in India on behalf of Foreign institutional Investors"
Earlier, HDFC Bank shares hit a record high after RBI on Thursday removed it from the ban list for foreign institutional investors (FIIs) buying, with immediate effect. RBI said that foreign investors' holding in HDFC Bank has fallen below the prescribed limit under the foreign direct investment policy.
HDFC Bank closed at Rs 1377.15 on BSE, up 3.75% from previous close. In morning trade, the scrip jumped as much as 9.24%, its biggest gain since 5 September 2013, to hit an all-time high of Rs1,450 a share. The stock gained for the sixth consecutive session and rose 5.8% in this period. So far this year, it has gained 14.2%.
India's benchmark Sensex rose 0.59% to close at 28,468.75 points and BSE Bankex rose 1.21% to 23,442.01 points. HDFC's arm Housing Development Finance Co. Ltd, too, pared its gains and closed 0.6% higher to Rs1,402.05 a share. So far this year, it's up 11.06%.
Foreign brokerage firm Goldman Sachs in a report said "This is likely due to the conversion of ESOPs (employees' stock options) which has led to foreign shareholding falling below 72% (versus the 74% FII limit-the RBI generally keeps a 2% buffer before opening the limit),"
Currently, its total foreign ownership stands at 71.85%, which implies a room of 0.15% of the capital and indicates that 3-3.5 million shares of HDFC Bank are available for foreign investors via the open market, analysts expect.
"Based on our math (we estimate 3-3.5 million shares have been added to the equity base on a monthly basis over the past few months due to stock option conversion), the FII shareholding is only marginally below 72% so expect the stock to get back into the FII ban list within a day or two of trading," the report added.
With this rally, HDFC bank becomes the second-most valued Indian company. Tata Consultancy Services is India's most valuable company with a market capitalization of Rs4.75 trillion. HDFC Bank has a market capitalisation of over Rs3.52 trillion, while Reliance Industries Ltd has a market cap of Rs3.48 trillion.
For the December quarter, HDFC Bank reported 15% rise in its net profit to Rs3,870 crore against Rs3,357 crore a year ago. Gross bad loans as a percentage of total loans were 1.05% in the December quarter versus 1.02% in the September quarter.
Analysts said that given its strengthening liability franchise, low exposure to stressed sectors and superior risk management practices, it will continue its streak of consistent performance.
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